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    Chapter 02 - Quality Cost

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    Nicole Reyes
    The document discusses the different types of quality costs including prevention costs, appraisal costs, internal failure costs, and external failure costs. It explains that prevention costs are incurred before production to prevent defects, appraisal costs measure and monitor quality, and failure costs occur due to defects. The goal is to reduce quality costs by lowering prevention costs through quality planning, reducing appraisal costs by using inspection data, and decreasing failure costs by addressing nonconformances. There is an optimal level of quality where additional improvements cost more than the savings from reducing defects.

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    Chapter 02 - Quality Cost

    Uploaded by

    Nicole Reyes
    59 views10 pages
    The document discusses the different types of quality costs including prevention costs, appraisal costs, internal failure costs, and external failure costs. It explains that prevention costs are incurred before production to prevent defects, appraisal costs measure and monitor quality, and failure costs occur due to defects. The goal is to reduce quality costs by lowering prevention costs through quality planning, reducing appraisal costs by using inspection data, and decreasing failure costs by addressing nonconformances. There is an optimal level of quality where additional improvements cost more than the savings from reducing defects.

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    Total Quality Cost

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    Chapter 02- Quality Cost

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    The document discusses the different types of quality costs including prevention costs, appraisal costs, internal failure costs, and external failure costs. It explains that prevention costs are incurred before production to prevent defects, appraisal costs measure and monitor quality, and failure costs occur due to defects. The goal is to reduce quality costs by lowering prevention costs through quality planning, reducing appraisal costs by using inspection data, and decreasing failure costs by addressing nonconformances. There is an optimal level of quality where additional improvements cost more than the savings from reducing defects.

    Copyright:

    © All Rights Reserved
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    59 views10 pages

    Chapter 02 - Quality Cost

    Uploaded by

    Nicole Reyes
    The document discusses the different types of quality costs including prevention costs, appraisal costs, internal failure costs, and external failure costs. It explains that prevention costs are incurred before production to prevent defects, appraisal costs measure and monitor quality, and failure costs occur due to defects. The goal is to reduce quality costs by lowering prevention costs through quality planning, reducing appraisal costs by using inspection data, and decreasing failure costs by addressing nonconformances. There is an optimal level of quality where additional improvements cost more than the savings from reducing defects.

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    of 10

    Quality Cost

    Cost of Quality
    • The cost of quality is expense of all the activities with a
    project to meet quality objectives.
    • It is also considered to be the costs (conformance & non-
    conformance) relating to be the quality characteristics of a
    product or service.
    • Helps in focusing manager’s attention on the cost of poor
    quality.

    COC CONC COQ


    Prevention costs

    Conformance
    Appraisal Costs

    Internal Failure Costs


    Non-
    Conformance
    External Failure
    Costs
    Types of Quality Cost
    PREVENTION COSTS APPRAISAL COSTS
    – In order to keep the quality – It measure and monitor the
    problem from happening. activities related to quality.
    – It is the cost of all activities – These costs are associated with
    specifically designed to prevent suppliers’ and customers’
    poor quality product or service. evaluation of purchased
    – They are planned and incurred materials, processes, products,
    before actual operation, and they and services to ensure that they
    could include: conform to specification.
    • Product or Services – This is done through a variety of
    requirements inspections.
    • Quality Planning • Verification
    • Quality Assurance • Quality Audits
    • Training • Supplier Rating
    FAILURE COST
    Internal Failure Cost External Failure Costs
    • These failures are discovered
    through the firm’s internal • Remedy defects discovered by
    inspection processes. customers.
    • Occurs when the results of work • These costs occur when products or
    fail to reach design quality services that fail to reach design
    standards and are defected quality standards are not detected
    before they are transferred to until after transfer to the customer.
    customer. • The costs includes
    • They could include: – Repairs and Servicing
    – Waste – Warranty Claims
    – Scrap – Complaints
    – Rework or Rectification – Returns
    – Failure Analysis
    Reducing Costs
    PROGRESSIVE REDUCTION OF
    REDUCTION OF PREVENTION COSTS APPRAISAL COSTS
    • It should be pre-planned. • Inspection before assessing anew
    • Must have preparation of a vendor, new process, or a new
    quality manual and set of product line.
    procedures. • It generates a lot of information that
    should be utilized skillfully to reduce
    • The employees must strictly
    future costs.
    follow the manual.
    • the company should try to make best
    • Must not hesitate to improve the use of the data available in the form
    processes and reduce the waste of inspection records.
    through prevention.
    REDUCTION OF FAILURE COSTS HIDDEN COSTS

    • These non conformances • Cannot be identified easily


    could lead to rework, • Includes customer-incurred
    scrapping, returns, and costs
    recalls.
    • Excessive use of materials
    • Should be documented in
    nonconformance or • High inventory
    discrepancy reports and • It can only be eliminated by
    classified in a database in eliminating failures.
    such a way that the
    organization can use the
    data to determine costs and
    areas for improvement.
    Joseph M. Juran
    • Define “quality as fitness”
    • Considered one of the Quality Gurus of 20th century
    • His concept more closely incorporates the viewpoint of
    customer.
    • He is prepared to measure everything and relies on systems
    and problem-solving techniques
    Optimum Quality Costs
    • It is common to find that quality levels can be economically improved to
    literal perfection.
    • The quality level increases, when the number of defects in the product or
    service reduces.
    • The cost of non-conformance (failure cost) decreases as quality level
    improves.
    • The quality level increases when the cost of conformance (sum of
    prevention and appraisal cost) increases.
    • The total quality cost is the sum of both.

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